Deck 33: Minimum Wage

Question 1

In Figure 33.1, at the market wage the consumer surplus is

A)W*AC
B)BW*C
C)BW_minEF
D)W_minAE

Answer 1

A

Question 2

A wage sufficient to keep a family out of poverty is called the

A)just wage.
B)minimum wage.
C)maximum wage.
D)living wage.

Answer 2

D

Question 3

If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $7.25 an hour. Suppose the economy slides into recession such that the new equilibrium wage was $6.50 per hour. This would cause them to

A)lower their offering wage to $6.50 an hour.
B)raise their offering wage to $9.00 an hour.
C)do nothing differently.
D)pay between $7.25 and $9.00.

Answer 3

C

Question 4

The longest period of time where the minimum wage remained constant in nominal terms was during

A)the Reagan Administration.
B)the Bush (George Herbert Walker)Administration.
C)the Clinton Administration.
D)the Eisenhower Administration.

Question 5

If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $7.25 an hour to new employees. Suppose a worker earns a $0.75 raise to $8.00 an hour. Now suppose the minimum wage rises to $8.25 and hour. This worker would be paid.

A)$8.00 an hour.
B)$8.25 an hour.
C)$9.00 an hour.
D)Somewhere between $8.25 and $9.00 an hour depending on the policies of the restaurant.

Question 6

If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $8.00 an hour to attract workers, a cut in the minimum wage to $5.00 an hour would cause them to

A)lower their offering wage to $5.00 an hour.
B)raise their offering wage to $9.00 an hour.
C)do nothing differently.
D)pay $7.25.

Question 7

The real minimum wage was at its all-time high

A)shortly after the increase in 1992.
B)shortly after the increase in 1968.
C)shortly after the increase in 1980.
D)at its inception in the 1930's.

Question 8

At $7.25 per hour the 2016 inflation adjusted minimum wage was

A)nearing a 50-year low.
B)at an all-time high.
C)near its historical average.
D)statutorily constant.

Question 9

At $5.15 per hour the 2007 inflation adjusted minimum wage was

A)nearing a 50-year low.
B)at an all-time high.
C)slightly above the historical average.
D)statutorily constant.

Question 10

In Figure 33.1, at the market wage the producer surplus is

A)W*AC
B)BW*C
C)BW_minEF
D)W_minAE

Question 11

The lowest wage that may be legally paid for an hour's work is called the

A)just wage.
B)minimum wage.
C)maximum wage.
D)living wage.

Question 12

In Figure 33.1, at the minimum wage the producer surplus is

A)W*AC
B)BW*C
C)BW_minEF
D)W_minAE

Question 13

The largest family size for which the earnings of a single minimum wage job holder has been above the poverty line is

A)one.
B)two.
C)three.
D)four.

Question 14

If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $7.25 an hour to new employees. Suppose a worker earns a $0.75 raise to $8 an hour. Now suppose the minimum wage rises to $8.25 an hour. The government requires this worker to be paid

A)$8.00 an hour.
B)$8.25 an hour.
C)$9.00 an hour.
D)somewhere between $8.25 and $9.00 an hour depending on the policies of the restaurant.

Question 15

In Figure 33.1, at the minimum wage the consumer surplus is

A)W*AC
B)BW*C
C)BW_minEF
D)W_minAE

Question 16

If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $7.25 an hour, an increase in market demand so that the new equilibrium was $9.00 per hour would cause them to

A)lower their offering wage to $6.50 an hour.
B)raise their offering wage to $9.00 an hour.
C)do nothing differently.
D)pay between $7.25 and $9.00.

Question 17

The minimum wage has never been sufficient to get a family of ____ above the poverty line.

A)one
B)two, three or four
C)three or four
D)four

Question 18

To get to its inflation adjusted all-time high, the minimum wage in 2016 would have to be at least

A)$5.50.
B)$11.00.
C)$14.00.
D)$20.00.

Question 19

In Figure 33.1, how many people would be unemployed at the minimum wage?

A)L_S - L*
B)L*-L_min
C)L_S-L_min
D)L*

Question 20

For the minimum wage to be relevant it must be

A)above the equilibrium wage.
B)below the equilibrium wage.
C)at the equilibrium wage.
D)slightly below the equilibrium wage.

Question 21

Those that lose from an increase in the minimum wage are

A)all workers.
B)those workers who keep their jobs.
C)workers that are laid off.
D)consumers who pay lower prices for goods.

Question 22

Suppose you were to hear a politician defend the minimum wage on the grounds that workers would be happier and more productive with a higher minimum wage, you would know this person to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 23

Those that gain from an increase in the minimum wage are

A)all workers.
B)those workers who keep their jobs.
C)employers.
D)consumers who pay lower prices for goods.

Question 24

Suppose you were to hear an economist defend the minimum wage on the grounds that she estimated that when she estimated the saving rate of minimum wage workers and found it to be much smaller than the savings rate of employers. You would know her to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 25

The rule-of-thumb among many economists suggests that a 10% increase in the minimum wage results in a ________ in the number of jobs held by teens.

A)10% to 15% drop
B)10% to 15% increase
C)1% to 3% increase
D)1% to 3% drop

Question 26

Suppose you were to hear an economist oppose the minimum wage on the grounds that she estimated the loss to small businesses and to the unemployed and found that it exceeded the gain to workers getting a higher wage. You would know her to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 27

Those that lose from an increase in the minimum wage are

A)all workers.
B)those workers who keep their jobs.
C)employers.
D)consumers who pay lower prices for goods.

Question 28

The majority of minimum wage workers are

A)trying to support a family.
B)young people who are not supporting families.
C)older workers who are retired.
D)middle aged.

Question 29

Suppose you were to hear a politician oppose the minimum wage on the grounds that it would hurt employers and employees (who lost their jobs)more than it would help those who earned a higher wage, you would know this person to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 30

The "work effort argument" criticizing traditional economic analyses of the minimum wage implies

A)increased real GDP should result from any increase in the nominal minimum wage.
B)increased real GDP should result from any reduction in the nominal minimum wage.
C)reduced real GDP should result from any increase in the nominal minimum wage.
D)any increase in the nominal minimum wage reduces short-run aggregate supply.

Question 31

If the cost of living is higher in richer cities than in poorer cities, and the nominal minimum wage were the same in every city, then the real purchasing power of the minimum wage would necessarily be

A)higher in the richer cities.
B)higher in the poorer cities.
C)lower in the poorer cities.
D)independent of the cost of living in any city.

Question 32

In Figure 33.1, how many people would lose their jobs as a result of the minimum wage?

A)L_S - L*
B)L*-L_min
C)L_S-L_min
D)L*

Question 33

The heart of the argument against an increase in the minimum wage is one based on

A)the macroeconomic argument.
B)the elasticity argument.
C)the work effort argument.
D)consumer and producer surplus analysis.

Question 34

If you view a dollar's worth of consumer surplus (received by employers)equal to a dollar's worth of producer surplus (received by employees)then the minimum wage usually

A)increases consumer surplus more than it decreases producer surplus, for a positive net effect.
B)increases consumer surplus less than it decreases producer surplus, for a negative net effect.
C)decreases consumer surplus less than it increases producer surplus, for a positive net effect.
D)decreases consumer surplus more than it increases producer surplus, for a negative net effect.

Question 35

The heart of the argument against an increase in the minimum wage is that

A)the net gain to workers is less than the loss to firms.
B)there is a net loss to workers.
C)there is a loss to firms.
D)there are workers who earn more than they are worth.

Question 36

Suppose you were to hear a politician defend the minimum wage on the grounds that the low-wage workers would spend more of their extra income that wealthier employers would and therefore the effect would be positive, you would know this person to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 37

Suppose you were to hear a politician defend the minimum wage on the grounds that it would not cause that much unemployment because firms have to hire a certain number of workers, you would know this person to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 38

The "elasticity argument" criticizing traditional economic analyses of the minimum wage implies that

A)any increase in employment greatly reduces the marginal productivity of employed workers.
B)any increase in employment greatly increases the marginal productivity of employed workers.
C)the short-run marginal productivity of workers is independent of the number of workers employed.
D)patriotic employers should want to pay their American employees more than their foreign employees.

Question 39

Suppose you were to hear an economist defend the minimum wage on the grounds that she estimated that the demand for labor is nearly vertical, you would know her to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 40

Suppose you were to hear an economist defend the minimum wage on the grounds that she estimated the productivity of workers both before and after an increase in the minimum wage and found that the increase in the minimum wage increases productivity by more (on a percentage basis)than it increased costs. You would know her to be relying on the ____ argument.

A)macroeconomic
B)elasticity
C)work effort
D)consumer and producer surplus

Question 41

Of the people receiving the EITC ___ would be in poverty without it.

A)10%
B)30%
C)70%
D)90%

Question 42

After increasing from $5.15 in 2007 to $7.25 in 2009, the inflation-adjusted minimum wage

A)was still at its lowest level in history.
B)was at its long term historical average level.
C)was at its all-time highest level.
D)was sufficient to keep a family of four out of poverty.

Question 43

City governments are not allowed to increase the minimum wage in their cities.

Question 44

If an increase in the minimum wage increases workers' incomes by $75 and reduces employers' incomes by $100, while workers' spend all of their income increase but employers reduce their spending by only eighty percent of their income reduction, aggregate spending

A)falls by $5.
B)falls by $25.
C)falls by $80.
D)remains unchanged.

Question 45

It is generally true that massive increases in the minimum wage help workers that keep their jobs more than it hurts workers that lose their jobs.

Question 46

State governments are not allowed to increase the minimum wage in their states.

Question 47

Economists generally believe that increases in the minimum wage will

A)increase teen unemployment.
B)decrease teen unemployment.
C)have a dramatic impact on the poverty rate.
D)have a dramatic impact on the taxes paid by the working poor.

Question 48

The "macroeconomics" rebuttal to the traditional analysis of the minimum wage argues that

A)the rich consume less than the poor out of extra income, therefore an increase in the minimum wage increases aggregate demand.
B)the rich consume more than the poor out of extra income, therefore an increase in the minimum wage increases aggregate demand.
C)people work harder when they feel they are inadequately compensated, therefore an increase in the minimum wage may actually lower productivity.
D)in the short run the demand elasticity of labor is such that businesses will actually increase the number of workers hired when the minimum wage increases.

Question 49

The "elasticity" rebuttal to the traditional analysis of the minimum wage, stating that employers' demand for workers is unresponsive to wage changes, centers on the idea that

A)the rich consume less than the poor out of extra income, therefore an increase in the minimum wage increases aggregate demand.
B)the rich consume more than the poor out of extra income, therefore an increase in the minimum wage increases aggregate demand.
C)people work harder when they feel they are adequately compensated therefore an increase in the minimum wage may pay for itself.
D)in the short run, the demand elasticity of labor is such that business will not reduce the number of workers hired when the minimum wage increases.

Question 50

The EITC is a

A)tax credit to working poor families.
B)a welfare program for which only nonworking families are eligible.
C)a provision in the minimum wage law that allows waitresses to be paid less because they get tips.
D)a provision in the minimum wage law that allows for a lower training wage.

Question 51

It is always in the interests of workers for the minimum wage to be as high as possible.

Question 52

It is generally true that modest increases in the minimum wage help workers that keep their jobs more than it hurts workers that lose their jobs.

Question 53

If an increase in the minimum wage increases workers' incomes by $75 and reduces employers' incomes by $100, while workers' spend all of their income increase but employers reduce their spending by only seventy-five percent of their income reduction, aggregate spending

A)falls by $5.
B)falls by $25.
C)falls by $80.
D)remains unchanged.

Question 54

As of June 2013, after two 70-cent increases in recent years, the federal minimum wage was

A)$5.15 per hour
B)$5.85 per hour
C)$7.25 per hour
D)nearly $9.00 per hour

Question 55

It is impossible to raise the minimum wage so high to hurt workers generally.

Question 56

It is possible to raise the minimum wage so high to hurt workers generally.

Question 57

If the demand for labor is inelastic then the unemployment caused by raising the minimum wage is

A)less than if it were elastic.
B)the same as if it were elastic.
C)more than if it were elastic.
D)unrelated to labor demand elasticity.

Question 58

Of the people working for the minimum wage ___ live in households with incomes below the poverty line.

A)10%
B)30%
C)70%
D)90%

Question 59

Increases in the minimum wage are in every worker's best interest.

Question 60

To achieve its goal of keeping a family of four with one wage earner out of poverty, the minimum wage would have to be

A)$5.15 per hour
B)$7.25 per hour
C)nearly $9.00 per hour
D)more $11.00 per hour